Field of the Invention
The present invention is directed generally to methods and systems for planning for retirement.
Description of the Related Art
Investors approaching retirement want to know if they will have sufficient financial assets to retire. After all, many investors work for a consistent, predictable paycheck all their lives and hope for the same kind of experience over the duration of their retirement. Whether an investor has sufficient assets to retire will depend on the investor's ability to safely support a proposed retirement spending plan. Many investors turn to advisors who help the investors turn their life savings into paychecks that help support retirement. One question that advisors want to be able to answer quickly and accurately is whether a prospective client has saved enough money.
The wave of baby boomers approaching retirement is spurring the retirement planning industry to find better ways to meet the needs of these investors. This is partly due to the number of boomers and partly because of the nature of the primary investment problem that impacts many of them. Accumulating assets over a long horizon is different from deploying those assets to fund retirement.
All investment decisions require trade-offs. As more investors rely on their portfolios for income, many of those trade-offs are becoming more apparent. A traditional total return approach is grounded in mean variance optimization (“MVO”), which produces asset allocation recommendations that balance risk and reward. These are defined, respectively, as standard deviation and expected (i.e., mean) return. While these measures may be useful for investors growing the assets in their portfolios, they are generally not as useful for investors withdrawing assets from their portfolios to fund retirement expenses.
Therefore, a need exists for methods of planning asset allocations before and during retirement. The present application provides these and other advantages as will be apparent from the following detailed description and accompanying figures.